Swan rejects budget 'stupidity' warning

Federal Treasurer Wayne Swan admits economic growth is slowing but has rejected criticism that pursuing a budget surplus is an act of government "stupidity".

The national accounts for the September quarter are due for release at 11.30 am (AEDT).

"I wouldn't be surprised if growth had come off," Mr Swan told ABC television on Wednesday.

Economists are forecasting growth of 0.6 per cent in the quarter for an annual rate of 3.1 per cent.

That will be a marked slowdown from the 3.7 per cent rate recorded in the 12 months to June, and more than 4 per cent to March.

Mr Swan has rejected warnings by former Reserve Bank governor Bernie Fraser that Australia is suffering from the "stupidity of government" by looking for a budget surplus while monetary policy is going the other way.

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Instead, Australia was enjoying the "reasonably healthy combination" of solid growth, low unemployment and a strong investment pipeline, he said, so the government was giving the central bank room to move on interest rates.

Mr Swan and business groups are urging the major banks to pass on the Reserve's 0.25 per cent cut to its cash rate.

"Their net interest margins are healthy," he said.

"They should pass this cut through in full."

A day after the decision to lower the rate to 3 per cent only three banks – NAB, ING Direct and Bank of Queensland – have responded.

ING has passed on the full cut while NAB and Bank of Queensland lowered loan rates by 20 basis points.

The Australian Bankers Association insists the major banks are holding back decisions because they want to be competitive.

"They are sitting there at the moment desperately wishing their competitors show their hand first so they can undercut," CEO Steve Munchenberg told ABC television.

Shadow treasurer Joe Hockey said Labor had now warned the banks more than 55 times to pass on official rate cuts in full.

"The banks have ignored them, which is no surprise because ultimately no one listens to the government," he said.

Opposition Leader Tony Abbott said the record of previous coalition governments showed the banks almost always passed on cuts in full.

"Since Wayne Swan has been the treasurer the banks have invariably procrastinated," he told reporters in Brisbane.